There are many metrics for determining how well your SaaS business is doing.
Net dollar retention is a key metric that indicates the health of the business.
To calculate it, take the revenue at the beginning of the month, plus upgrades, minus downgrades and churn. Divide this by the revenue at the beginning of the month.
If the formula is above 100%, then your business is growing.
If it’s below 100%, then it’s shrinking.
The key to a high net dollar retention rate is strong customer service.
Low net dollar retention rate comes from poor service.
Market-leading companies often have a net dollar retention rate well above 100%.
Know your numbers and use them to guide your execution.
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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.